Tuesday, December 25, 2012

The traditional, premodern state form
is that of a (absolute) monarchy. Yet monarchy was faulted, in
particular also by classical liberals, for being incompatible with
the basic principle of "equality before the law." Monarchy
instead rested on personal privilege. Thus, the critics of monarchy
argued, the monarchical state had to be replaced by a democratic one.
In opening participation and entry into state government to everyone
on equal terms, not just to a hereditary class of nobles, it was
thought that the principle of the equality of all before the law had
been satisfied.

However, this democratic equality
before the law is something entirely different from and incompatible
with the idea of one universal law, equally applicable to everyone,
everywhere, and at all times. In fact, the former objectionable
schism and inequality of a higher law of kings versus a subordinate
law of ordinary subjects is fully preserved under democracy in the
separation of "public" versus "private" law and
the supremacy of the former over the latter.

Under democracy, everyone is equal
insofar as entry into government is open to all on equal terms.
Everyone can become king, so to say, not only a privileged circle of
people. Thus, in a democracy no personal privileges or privileged
persons exist. However, functional privileges and privileged
functions exist. Public officials, as long as they act in an
official capacity, are governed and protected by public law and
occupy thereby a privileged position vis-à-vis persons acting under
the mere authority of private law.

In particular, public officials are
permitted to finance or subsidize their own activities through taxes.
That is, they do not, as every private-law subject must, earn their
income through the production and subsequent sale of goods and
services to voluntarily buying or not-buying consumers. Rather, as
public officials, they are permitted to engage in, and live off, what
in private dealings between private-law subjects is considered
"theft" and "stolen loot." Thus, privilege and
legal discrimination — and the distinction between rulers and
subjects — will not disappear under democracy. To the contrary.
Rather than being restricted to princes and nobles, under democracy,
privileges will be available to all: everyone can engage in theft
and live off stolen loot if only he becomes a public official.

Predictably, then, under democratic
conditions the tendency of every monopoly of ultimate decision making
to increase the price of justice and to lower its quality and
substitute injustice for justice and is not diminished but
aggravated. As hereditary monopolist, a king or prince regards
the territory and people under his jurisdiction as his personal
property and engages in the monopolistic exploitation of his
"property."

Under democracy, monopoly and
monopolistic exploitation do not disappear. Rather, what happens with
democracy is this: instead of a prince and a nobility who regard the
country as their private property, a temporary and interchangeable
caretaker is put in monopolistic charge of the country. The caretaker
does not own the country, but as long as he is in office he is
permitted to use it to his and his protégés' advantage. He owns its
current use — usufruct — but not its capital stock. This does not
eliminate exploitation. To the contrary, it makes exploitation
less calculating and carried out with little or no regard to the
capital stock. Exploitation becomes shortsighted and capital
consumption will be systematically promoted.

Sunday, December 23, 2012

Given what appears a nearly willful historical amnesia, it is easy for the popular imagination to suppose that existing political and social conventions have always been so, or that preceding social norms are by necessity inferior to the current "enlightened" perspective promulgated via public education and popular media.

As such it would be inconceivable for many that "the law" has any other source than legislative bodies. For an American the answer to the question "Where do laws come from?" is, if goes beyond a nebulous "the government," is Congress, where democratically elected representatives compose the rules of society. Before that, if before that is even considered, kings ruled arbitrarily with absolute power, always fighting wars and throwing people in dungeons.

But the idea that law is either the will of the king or the work of the legislature is a very recent idea, arising in America at least, in the early 20th century with the Wilsonian concept of democracy as a transcendental ideal and the ultimate "good" form of government..

The idea is that law is independent of kings and legislatures, that like the rules of logic derived from axiomatic first principles, the law is the logical structure derived the from the moral principles of human interaction.

Saturday, December 15, 2012

Checking out at the grocery store the other day, I paid for
my sack of rolls. The checkout person handed me my bag.

"Thank you," I said.

"You're welcome," she replied.

I walked away with a sense that something was wrong. Do check-
out people usually say, "You're welcome," and nothing else? Not usually.

Usually they say, "Thank you," same as the customer says. (Remember,
we are talking about the American South, land of politeness, here.)

I was left with an inchoate sense of: "Hey, I did something for you too."

When do we say, "You're welcome"? We say that when we give a gift
(a good or service) to a person without receiving anything in return. For
example, I might hold a door for a person. That person says, "Thank
you," and I say, "You're welcome." Another time might be at a birthday
party when the recipient of a gift expresses thanks.

These are one-way examples of benefaction. We are giving but not
necessarily getting anything tangible in return. What makes the case of
the commercial exchange different? Why do both parties say, "Thank
you"? It's because each side gives a gift to the other.

When I bought those rolls, this is precisely what happened. I saw
rolls available and I decided that the rolls were worth more to me than
the $2 I had in my pocket. From the store's point of view, the $2 was
worth more than the rolls being given. Both parties walk away with a
sense of being better off than they were before the exchange took place.

The checkout person is there to facilitate this exchange and speak
as a proxy for the interests of the store. The store was receiving a gift of
money (more highly valued than the rolls) and I was receiving the rolls
(more highly valued from my point of view than the $2 I gave up to get
them).

This is the essence of exchange and the core magic of what happens
millions, billions, trillions of times every day all over the world. It
happens in every single economic exchange that is undertaken by virtue of
human choice. Both sides benefit.

Each side is a benefactor to the other side. This system of mutual
benefaction, unrelenting and universal, leads to betterment all around. It
increases the sense of personal welfare, which is to say, it increases social
welfare when everyone is involved in the activity.

To be sure, a person might change his mind later. I might arrive
home with my rolls and discover that I'm out of butter and that I would
have been better off buying half as many rolls and using the rest of my
money to buy butter. I might decide to drop bread from my diet. I might
conclude that rolls are really not that tasty. All these things can happen.

Such is the nature of the universe that the future is uncertain and human
beings are inclined to be fickle. But at least at the time of the exchange, I
believed I was better off, else I would not have made the exchange in the
first place. I walked away with a sense of gain. The store owners had the
same sense of gain. We both expect to gain, which is enough to recommend
the exchange system, since no social system can guarantee a happy
outcome for every action.

Now, if all of this seems obvious and not even worth pointing out,
consider that most philosophers in the history of the world have missed
this point. Aristotle, for example, reflected at length in his Nicomachean
Ethics on the issue of economic exchange, but he started with the
assumption that exchange takes place when valuation is equal or commensurate.
But what about cases in which it seems obviously incommensurate,
such as when highly valued and rare physician services are
traded for something widely available like corn? Aristotle believed that
the existence of money serves to somehow equalize the exchange and
make it happen, when it should be apparent that money itself is only a
good introduced to make exchange more convenient.

The problem he faced was his initial premise that economic exchange
is based on the equal value of items in the exchange. This is just wrong.

If two people value goods equally, an exchange would never take place,
since no individual could be made better off than before. If exchange is
based on equal value, people are merely wasting time engaging­ in it at
all. Exchange in the real world is based on unequal valuations of goods
and expectation of being made better off. It is a matter of two people who
give each other gifts in their own self-interest.

The discovery of the correct theory of exchange had to wait until
the late Middle Ages when the followers of St. Thomas Aquinas saw the
logic for the first time. They saw that economic exchange was mutually
beneficial, with each party to the exchange seeing an increase in personal
welfare, subjectively perceived. Therefore the action of exchange on its
own becomes a means of increasing the well-being of all people. Even if
there is no new physical property available, no new innovations, no new
productivity, wealth can be increased by the mere fact of exchange-based
human associations.

As with many postulates of economics, this seems very obvious once
you see it but it is evidently not obvious at all. In fact, I've observed that
many people's underappreciation of the contribution of the market order
is rooted in the perception that buying and selling stuff really amounts to
nothing wonderful at all. It is just a swirl of churning and burning for the
sake of nothing in particular. Society could easily do away with it and be
no worse off.

I have a hard time figuring out what people who believe this are
thinking. Let's say that I proposed abolishing gift giving. Wouldn't it be
obvious that society would be worse off if I got my way? We would no
longer enjoy the material manifestation of the appreciation of others, and
we would all be denied the chance to show others our appreciation of
them.

Well, if it is true, as I've argued, that an economic exchange is a two-
way gift, an instance of mutual benefaction that is pervasive throughout
society, it becomes clear that society would be completely sunk without
as many opportunities as possible for economic exchange. Anyone who
champions the well-being of society should especially celebrate commercial
centers, stock markets, international trade, and every sector in
which money changes hands in exchange for assets or goods. It means
nothing more than that people are finding ways to help each other get by
and thrive.

As sixteenth-century Spanish theologian Bartolomé de Albornoz,
known mostly for his opposition to slavery, wrote,

Buying and selling is the nerve of human life that sustains
the universe. By means of buying and selling the
world is united, joining distant lands and nations, people of
different languages, laws and ways of life. If it were
not for these contracts, some would lack the goods that
others have in abundance and they would not be able
to share the goods that they have in excess with those
countries where they are scarce.

However, if we do not quite see the underlying logic of exchange and
how it works to help everyone, it is easy to underappreciate what market
trading means to society. This is a tendency in the circles that discuss
issues of social justice. The market is rarely given the credit it deserves
for helping humanity improve its lot. In fact, the market is nothing but
the cooperative interaction of humanity in improving the commonweal.

The fallacy of value equivalence in exchange has been refuted for
some 500 years, and yet it keeps reappearing. Economics is one of those
sciences that require careful thought. It can't be quickly intuited from
a handful of moral postulates. It must be studied and understood with
deductive tools and patient delineation of a wide range of concepts. It is
because of this that economics as a science was so late in developing. But
it is not too late for us to understand.

The understanding of economics leads to a direct appreciation of
the contribution of free markets to the well-being of all. If you read something
that seems to disparage the market economy, it is more than likely
that a fallacy such as the above is at the root.

At some point today, you will undoubtedly engage in some economic
exchange. Use the opportunity to reflect on what a glorious
dynamic underlies it. You can say, "Thank you." The person who takes
your money can say, "Thank you." Such opportunities account for most
of the peace and prosperity we enjoy this side of heaven.

About Me

Puck T. Smith is the nom de plume of a man who wishes to live his life in peace and obscurity while at the same time sharing the insights he has acquired through both suffering and joy in more than half a century of living in this world of terrible tragedy, radiant beauty and dizzying possibilities.